- Dollars and Cents: How Money is Made – Lesson
- Supply and Demand: It’s Basic Economics – Lesson
- What Is Credit and How Is It Used? – Lesson
- What is Interest? – Lesson
- Taxation: What is it? – Lesson
- What is GDP? – Lesson
- The Supply Chain Crisis – What Is It? – Lesson
- The Supply Chain Crisis – What Is It? – Quiz
The U.S. Monetary System
Cycles of the Economy
All About Investing
The Future of Money
Capitalism vs Socialism: How Much Should the Government Control? – Lesson
More government involvement or less – which is better for the people?
Right now, debate rages across the United States between people who favor socialism and those who prefer a free market system. Some people are pushing for more government involvement in the lives of everyday Americans, while others argue that a more powerful state can restrict freedom and become oppressive. But what is the difference between the two systems?
What Is the Free Market?
Under capitalism, people can buy and sell as they want, and they are in control of their own economic wellbeing. In its purest form, this system does not involve government control. The state is not allowed to tell the people what they can or cannot buy or sell. Furthermore, the government does not manufacture or sell products or assign prices.
A free-market system is one that thrives on competition. Companies must continually find more effective ways to create better products and sell them at lower prices. If a company fails to do this, it will lose customers and eventually – if it gets bad enough – go out of business.
What is Socialism?
Socialism is different from capitalism in that it involves a lot more government influence over the economy and society. A socialist system usually does not have free markets in which companies can compete with one another. Instead, the government controls the economy. The state is responsible for the manufacture and sale of products and services. It also sets the prices for each product.
Some prefer socialism because its goal is to lower or even eliminate costs. With the government owning all goods and services, no one makes more money than anyone else – at least in theory. The idea is that everything is equal for all people.
Under socialism, there is little or no direct cost for necessary goods and services. But on the other hand, most of the money people earn goes straight to the government through extremely high taxes.
Which System Do We Use?
The United States currently has a system that is mostly capitalistic but includes elements of socialism. While the government does not completely control the health care system, they are involved through legislation like the Affordable Care Act, otherwise known as Obamacare.
Republicans and Democrats disagree on how involved the government should be in American society. Democrats push for the state to have a larger role in the economy because they believe it will help more people. But Republicans usually push back against increasing the size of government because fully socialist countries like Venezuela and North Korea end up oppressing the people they are supposed to serve.
The debate between capitalists and socialists will continue into the near future, especially during the 2020 election.